"In the first quarter, both the IBM Cloud and our cognitive solutions
again grew strongly, which fueled robust performance in our strategic
imperatives," said Ginni Rometty, IBM chairman, president and chief
executive officer. "In addition, we are developing and bringing to
market emerging technologies such as blockchain and quantum,
revolutionizing how enterprises will tackle complex business problems in
the years ahead."

FIRST QUARTER 2017

Gross Profit

Diluted EPS

Net Income

Margin

GAAP from Continuing Operations

$1.85

$1.8B

42.8%

Year/Year

-11%

-13%

-3.7Pts

Operating (Non-GAAP)

$2.38

$2.3B

44.5%

Year/Year

1%

-1%

-3.0Pts

Strategic

REVENUE

Total IBM

Imperatives

Cloud

As reported (US$)

$18.2B

$7.8B

$3.5B

Year/Year

-3%

12%

33%

Year/Year adjusting for currency

-2%

13%

35%

"We continued to make investments in the first quarter to expand our
cognitive and cloud platform and we increased our research and
development spending," said Martin Schroeter, IBM senior vice president
and chief financial officer. "At the same time we returned more than
$2.6 billion to shareholders through dividends and gross share
repurchases."

The company continues to expect operating (non-GAAP) diluted earnings
per share of at least $13.80 and GAAP diluted earnings per share of at
least $11.95. Operating (non-GAAP) diluted earnings per share exclude
$1.85 per share of charges for amortization of purchased intangible
assets, other acquisition-related charges and retirement-related
charges. IBM continues to expect free cash flow to be relatively flat
year to year.

Cash Flow and Balance Sheet

In the first quarter, the company generated net cash from operating
activities of $4.0 billion, or $1.9 billion excluding Global Financing
receivables. IBMs free cash flow was $1.1 billion, down year to year
consistent with the amount of the Japan tax refund received in the first
quarter of 2016. IBM returned $1.3 billion in dividends and $1.3 billion
of gross share repurchases to shareholders. At the end of March 2017,
IBM had $3.8 billion remaining in the current share repurchase
authorization.

IBM ended the first quarter of 2017 with $10.7 billion of cash on hand.
Debt, including Global Financing debt of $28.5 billion, totaled $42.8
billion. Core (non-Global Financing) debt totaled $14.3 billion. The
balance sheet remains strong and is well positioned to support the
business over the long term.

For the first quarter, IBMs ongoing effective GAAP tax rate was
approximately 12 percent. The ongoing effective operating
(non-GAAP) tax rate was approximately 15 percent, which is within the
expected range of 15 percent plus or minus 3 points provided earlier
this year. IBMs reported tax rates include the effect from a discrete
tax benefit disclosed earlier this year.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein,
statements contained in this release may constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are based on the
companys current assumptions regarding future business and financial
performance. These statements involve a number of risks, uncertainties
and other factors that could cause actual results to differ materially,
including the following: a downturn in economic environment and client
spending budgets; the companys failure to meet growth and productivity
objectives, a failure of the companys innovation initiatives; risks
from investing in growth opportunities; failure of the companys
intellectual property portfolio to prevent competitive offerings and the
failure of the company to obtain necessary licenses; cybersecurity and
data privacy considerations; fluctuations in financial results, impact
of local legal, economic, political and health conditions; adverse
effects from environmental matters, tax matters and the companys
pension plans; ineffective internal controls; the companys use of
accounting estimates; the companys ability to attract and retain key
personnel and its reliance on critical skills; impacts of relationships
with critical suppliers; product quality issues; impacts of business
with government clients; currency fluctuations and customer financing
risks; impact of changes in market liquidity conditions and customer
credit risk on receivables; reliance on third party distribution
channels and ecosystems; the companys ability to successfully manage
acquisitions, alliances and dispositions; risks from legal proceedings;
risk factors related to IBM securities; and other risks, uncertainties
and factors discussed in the companys Form 10-Qs, Form 10-K and in the
companys other filings with the U.S. Securities and Exchange Commission
(SEC) or in materials incorporated therein by reference. Any
forward-looking statement in this release speaks only as of the date on
which it is made. The company assumes no obligation to update or revise
any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding
the companys results as determined by generally accepted accounting
principles (GAAP), the company has also disclosed in this press release
the following non-GAAP information which management believes provides
useful information to investors:

Free cash flow guidance is derived using an estimate of profit, working
capital and operational cash outflows. The company views Global
Financing receivables as a profit-generating investment, which it seeks
to maximize and therefore it is not considered when formulating guidance
for free cash flow. As a result, the company does not estimate a GAAP
Net Cash from Operations expectation metric.

The rationale for managements use of these non-GAAP measures is
included in Exhibit 99.2 in the Form 8-K that includes this press
release and is being submitted today to the SEC.